Ripple faces yet another lawsuit for selling unregistered securities

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San Francisco-based Ripple Lab Inc. has been hit with yet another lawsuit. The new lawsuit, which also lists the CEO Brad Garlinghouse as a defendant, claimed the company sold unregistered securities. The lawsuit, just like many others that preceded it, alleged that the company created a digital currency that has no real use, other than enriching a few individuals.

The latest lawsuit was filed by Bitcoin Manipulation Abatement LLC, a company registered in Puerto Rico. The lawsuit, filed in the Northern California District Court, is seeking to recover damages and other relief.

According to the court documents, the plaintiff claims that XRP is a security and that Ripple has been selling it without the proper registration from the authorities. It stated, “XRP is a security because the purchasers were led to believe they could expect a profit and were told that XRP would be a long-term growth asset.” XRP isn’t a currency since you can’t purchase services or products with it, the plaintiff argues.

All the 100 billion XRP in existence were created from thin air by Ripple, the lawsuit claimed. At the time, it incurred no costs in churning out the tokens. It then apportioned 20% to the founders and locked up the 80% in escrows which it sells programmatically.

Since the growth of XRP is entirely dependent on the actions of Ripple, the company and its CEO Garlinghouse have made “a litany of false and misleading statements regarding XRP in violation of California’s securities laws, and false advertising and unfair competition laws.”

Ripple created XRP for the sole purpose of enriching a few individuals, the suit claims. And it has served its purpose well, with the company “in numerous offerings, having sold $1.1 billion in XRP to retail customers in exchange for legal tender cryptocurrencies.”

While lawsuits against Ripple are nothing new, the latest plaintiff is a bit eye-catching. The company was registered in March 2019 in Puerto Rico, with its activities since then being very limited. It has no online presence, with Stephen Palley, a partner at Anderson Kill describing it, “a plaintiff that looks like it was created as a litigation vehicle.”

Its only other known presence was when it filed a lawsuit against derivatives exchange FTX. The $150 million lawsuit alleged that the company had tried to manipulate the price of BTC on Binance twice, albeit unsuccessfully.